China, technology, and progress

In response to my recent post about a China-bashing campaign ad, several commenters replied that I was ignoring the fact that many American lose out as a result of trade with China, and that the ad is okay because it’s criticizing policies that encourage or fail to prevent that trade. And it’s true, trade does create losers. Furthermore, we can certainly argue about trade policies on the margins, which is what the ad starts off doing. But to move from there to implying that we shouldn’t praise the economic growth and modernization in China that has been called an “economic miracle” shows wild indifference to the welfare of the hundreds of millions who have been lifted out of poverty. Heaping stupid stereotypes like gong sounds and fortune cookies on top of that adds even more offensiveness. Honestly, I’m surprised they didn’t use the Oriental riff.

Ads like this beg the question of why we only get angry when jobs are lost to trade. Yes, there have been many manufacturing jobs lost as companies increasingly produce and assemble manufactured goods in China, Vietnam, and many other areas of Asia. But the destruction of jobs not a byproduct of trade alone, but a byproduct of progress in general. Technology, for instance, is easily as a powerful a job killer as trade. You can see this in the fact that while manufacturing employment has decreased in this country, total manufacturing output and output per worker has gone up. The following graphs, courtesy of Mark Perry, display these facts nicely:

The massive increase in productivity, with output increasing even as jobs decrease, demonstrates that trade is not the only thing that destroys jobs; so too does technology, and the productivity it creates. Yet could you imagine a campaign ad criticizing a politician because he supported technology? Or productivity?

It’s important to recognize that there are very few forms of progress that don’t make some people worse off. Imagine if the growth in China’s economy had come solely from the production of some good that we didn’t make in the U.S., and in fact wasn’t made anywhere else in the world. Still, the huge increases in wealth would drive commodity prices higher, which means we would pay more for things like copper and oil. Sure some people who purchase and enjoy the brand new products that our hypothetical China makes would be better off, so too would those employed in the industries making goods China imports. But some people would only be made worse off by higher commodity prices, both directly and indirectly, as higher input prices make some production unprofitable and thus jobs are lost. Should this diminish the fact that millions of people in China were lifted out of poverty?

The industrial revolution produced winners and losers too. Blacksmiths and buggy whip makers were put out of business by the automobile. Does this diminish the invention of the automobile? Greater agricultural productivity put many farmers out of business. Do people demonize the industrial revolution for making them worse off?

This isn’t just true for big, economy-wide shifts in technology, but individual inventions as well. The success of the iPod has destroyed jobs at Walkmen assembly plants. A quick, easy, and cheap cure for cancer would put many specialized healthcare workers out of a job. This is creative destruction, and it would be wrong to argue that’s it’s not a great thing.

If you think the difference between trade and technology is that our trade policies gives China an edge, consider the many ways in which we subsidize technology, innovation, R&D, and capital in this country. These subsidies, like the trade distortions, mostly just exaggerate an unstoppable trend. Take a look again at the output per manufacturing worker in the graph above, clearly it would be ridiculous to assume that absent those subsidies to technology and capital the state of manufacturing would be as it was in the 1970s. Sometimes progress is inevitable.

Likewise a massive shifting of manufacturing to China and other parts of Asia was inevitable once certain developments took hold. What happened was the China government began easing it’s boot off the throat of it’s people by gradually moving from Moaism to a mixed economy. Once that transformation had begun there’s only so much that trade or exchange rate policies can or could have done to prevent massive amounts of manufacturing from moving to China. By maligning China’s economic success, by attacking someone for saying it is a great thing, you can only be defending the boot upon China’s throat, because there’s nothing short of autarky we could have done to stop much of what has occurred.

Just as manufacturing jobs inevitably shifted from here to China, rising wages in China have begun the inevitable shift of some manufacturing from China to poorer countries like Bangladesh.

I believe in a social safety net. We should help workers whose jobs are destroyed and who are facing hardship. But there is no reason to privilege workers whose jobs were destroyed by China’s growing economy over those whose jobs were destroyed by technology. Likewise we should no more demonize China than we would demonize inventors and the technologies they produce.

UPDATE: Via Matt Yglesias comes an important reminder that the Democrats are not the only ones bashing China with xenophobic ads. The following video is even more egregious and disgusting than the anti-Toomey ad.

18 comments

Part of the criticism is not just that jobs are going to China, but the perception that China is “cheating”, using artificially low currency and unfair subsidies to promote manufacturing.

If a job is going to go to China due to lower labor costs, fine. But if it’s going there because the Chinese government is subsidizing over-capacity by currency and tax manipulation, then it’s not cool.

Losses due to trade are a major problem right now because of political shifts in the world. Because much of the world had rejected trade and free market-oriented economic development, vast amounts of human capital have built up over time while workers in the Western world benefited greatly from an artificial shortage of workers of all stripes.

With the reforms that started happening in the 1970s and 80s, that human capital was ever more easily tapped, depressing the value of labor elsewhere. The issue isn’t trade per se, but the vast disparity created. Rather than spreading these changes over the last 70 years, they have been forced into half that time, causing jarringly disruptive adjustments. To a certain extent, the recession is one of the consequences of that story, as is our current budget problem, as Western nations choke on capital the world has not developed a good use for.

China recognizes this fully, however, while we do not. Many of the backwards economic and social policies in China are simply backstops against jarring social change and the threat of instability. What in the US might mean volatile election cycles could mean riots and revolution in other countries; this has made them careful students of change. By contrast, we’re not really looking into the consequences of what is happening and that’s troubling; if we can’t be bothered to pay attention, we’re sure to pay the price.

You write: By maligning China’s economic success, by attacking someone for saying it is a great thing, you can only be defending the boot upon China’s throat, because there’s nothing short of autarky we could have done to stop much of what has occurred.

Baloney, on several fronts.

First of all, why are you making this a zero sum game? One can be perfectly happy for the Chinese peasants being lifted out of poverty but at the same time say that – speaking as an American – this was not worth the destruction of X number of jobs in America.

Once again, the operative question is this: Is the economic advance of China worth the economic dislocations TO AMERICANS. Your answer to this question is likely to depend on where you live, right? If you live in the rust belt, I’m thinking you’re going to have a very hard time looking around and saying – you know what? It was worth it.

Is that “defending the boot on China’s throat?”

Also, you cite example after example of individual crafts/shops put out of business over time; blacksmiths, buggy whip makers. But what we are talking about here is manufacturing on the whole; and in terms of jobs shipped to China, specific policy decisions that have made this easier.

Let’s not kid ourselves and say that those policy decisions were made in order to elevate the poor Chinese. They were made because those who own the manufacturing concerns could pay the workers less money, manufacture the product for substantially less, and make a greater profit. Of course they were going to salivate at the opportunity to pay the Chinese worker cents on the dollar that the American worker would demand. But none of this mitigates the impact on American communities that have lost these jobs.

We get angry because China is engaging in trade war, and we are not only capitulating, but American industry – and to a large extent government – is aiding and abetting. The last 40 years have been a time of massive economic treason.

China uses protectionist tariffs and currency manipulation in a mercantilist fashion. The reason we no longer make most clothing articles here, and much of manufacturing has gone off-shore has nothing to do with technology. The real reasons are that, 1)starting with the Nixon administration, we removed our tariffs, and 2) off-shoring enriches the already wealthy at the expense of the declining middle class.

Coincidence or not, since Nixon, US GDP growth has been in a steady decline. Also, the enormous productivity gains in your graphs have been entirely captured by the richest few percent, while the real median wage has actually declined over the past 40 years. Per 2007 data, it was less than 20% of the mean.

You have denied that wealth and income disparity are real, but they are now even larger than in 1929.

Your entire argument is a smoke screen.

It’s up to China, not us, to raise their standard of living. I see ours in decline, which makes the whole thing a 0-sum situation, and it’s tragic. You, on the other hand, seem just fine with it.

The notion that you could tariff your way to prosperity is absolutely ridiculous.

A careful reader will note that I didn’t suggest that it would. OTOH, tariffs served us rather well in the 19th century, and are serving China’s purposes rather well now, wouldn’t you say? It’s a tool to provide an artificial competitive edge. If it didn’t work, people would stop using it.

If you could show me where I deny wealth and income disparity are real that would be helpful, since I’m pretty sure I’ve never said that.

I worded that rather carelessly. My bad. What you denied – unless I misread you, which is actually possible in retrospect, since you were rather terse – is that alleged indicators of income mobility are misleading phantoms. The reality is if you are born either rich or poor, you will almost certainly die in that same condition.

“Ads like this beg the question of why we only get angry when jobs are lost to trade.”

Willful and deliberate trade policy is not the same thing as technological innovation. Does somebody really need to explain the difference to you?

“It’s important to recognize that there are very few forms of progress that don’t make some people worse off.”

And if you reflexively define certain policies as progress, it makes it impossible to consider them in any sort of intelligent light. Why don’t you put up a graph of wage stagnation in the U.S. and talk about how much wonderful “progress” that indicates.

1) When the slope was steepest, the single earner family was he norm. Looks like prosperity to me.

2) The two earner family has been the norm since about the 70’s (except for single mothers, I suppose.) Despite two earners, median family income has stagnated since the 70’s or 80’s. Meadian worker makes less than his dad did at the same stage of life. Good bye American dream.

You’re suggesting it again in that comment. Do you believe it or not? And governments wouldn’t do it if it wasn’t good is a pretty weak defense, since governments make terrible economic policy all the time.

A tariff is a tool that can be used to alter the playing field to gain a certain advantage. No you can’t “tariff” your way to prosperity, and you are being absurd – and, I believe, quite deliberately so – to suggest that that is what I meant.

But that’s typical. Rather than confront the main issues – which are 1) China exporting their unemployment and the U.S. eagerly importing it, 2) the destruction of the middle class, and 3) the slow strangulation of the U.S. economy – you want to bog the discussion down in the minutia of an ancillary point. Of all the comments here, this is the one you pick to gnaw at.

That governments make bad decisions is true, but irrelevant to your point.

It’s more relevant to mine, though, which is that our Gov’t has aided and abetted all the awful things I brought up here.

If you don’t want me to spend time responding to half-thought out arguments that you don’t really want to defend, then save us both time and don’t fill your comments with so many of them. If you have a strongest point and 10 weak points, just make the strong one. Tossing off a lot of bad arguments just to appear as if you are scoring points is a distraction, and you frequently do this.

You built an quasi-argument around a misrepresentation of what I said. If you feel my argument is weak, then fine, prove me wrong. But you will never get there by dithering about your own mental construct. So please, more rational discourse and less sophistry.

And I did not make a bad argument. A tariff (note, btw it is a noun, not a verb) is one more tool in the utility belt. It is used to either gain or counter a competitive advantage, and to finance government activities; and to those ends served our purposes very well during the 19th century. You have made no argument to counter those facts. In fact, you’ve made no argument of any kind.

Back to the present: Who imposes more tariffs, China or U.S.? Who is artificially keeping their currency weak, China or U.S.? The point you chose to ignore is the imbalance in trade policies.

Now, back to your question, which I will answer again.

We get angry because China is engaging in trade war, and we are not only capitulating, but American industry – and to a large extent government – is aiding and abetting. The last 40 years have been a time of massive economic treason.

Your technology argument is a red herring. Large chunks of industries like clothing manufacture haven’t been displaced by technology, they have simply been shipped overseas.

Here is another example – China supplies 97% of the worlds rare earth needs. We have have significant domestic deposits of rare earths, and used to dominate production, but are not now a significant player. Meanwhile, China is set to majorly manipulate that market.

If you weren’t implying that tariffs are a means to prosperity then why did you reference that GDP growth has been in a decline since we began removing them in the Nixon administration?

If tariffs and currency manipulation are why clothing and other basic manufacturing is in China, then why are they beginning to go from China to Bangledash? Is this due to Bangledeshi currency manipulation and subsidies

[…] China, globalization, xenophobia | by Adam Ozimek James Fallows at the Atlantic backs up my criticisms of the awfulness of a recent campaign ad against Pennsyulvania U.S. Senate candidate Pat Toomey. […]